Large Sum or Monthly Pension

Hi, my husband’s company is offering Early Retirement Offer. The offer is better then the one he would get if he retired normally in 2 years. We keep going back and forth on if he should take the large sum or the monthly pension the company is offering. The large sum the company is offering is 3x the amount. I want monthly to have peace of mind of getting money each month for sure. He wants the large sum to invest it to keep earning money. There is one thing I don’t know if the monthly amount would be enough for us or not to use to much of the 401k money each month.

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I know a couple who chose the lump sum, I would have to investigate what made that work for them, though. They both had similar retirements, they took lump sum on one and monthly on the other. Do you have a retirement that could be your monthly?

I would check into what you need to roll this over to, in order to avoid any unexpected taxes. This is a strategy out there in the world, other financial advice columns have this question, so definitely look into ones with a good history.

I look forward to hearing what works for you guys!

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Hi, I do not have a pension to be our monthly. We decided on the monthly payments. There wasn’t anything out there could give us a better deal on monthly payments. This way we know we are guaranteed a certain amount every month for the rest of our lives. Also we figured it would be easy to keep dipping into the lump sum. Then it would be gone.

I do know of one couple, they retired with identical pensions, so one took the lump sum and one did the monthly. It’s working for their purposes.

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I think this depends on a few factors, which is:

  1. How much larger is the sum vs. monthly? And what’s the breakeven point (i.e. when do you expect to…you know, stop being able to enjoy the money)? If something unfortunate should happen, are you OK with giving up the difference between your large lump sum vs. the monthly income stream?

  2. What returns are you looking to do if you were to invest in, say, a safe dividend index? And do those returns exceed what your monthly paid would otherwise get you?

  3. If the answer for #2 is “no” - are you OK with earning less overall income but then have a larger nest egg that’ll compound by itself each year?

  4. Are you more using this money for yourself or passing it on to children?

I feel like if you know the answer to these 4 questions, you’ll be able to come to a level of clarity as far as what you should do.

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